Deferred prosecution agreements can draw companies in from the cold in Canada

When public interest is involved, the law provides them with an opportunity to come clean for the offences happening within their structure. This is what a deferred prosecution agreement (DPA) is for.

Given that it was introduced in Canada with a rocky start, how do DPAs fit in the country’s criminal justice system?

What is a deferred prosecution agreement?

A deferred prosecution agreement, also called remediation agreement, is an understanding between government prosecutors and the corporation accused of certain crimes.

Under a DPA, prosecution of the accused corporation will be suspended for a definite period and subject to certain conditions provided in the DPA.

If the accused corporation has faithfully complied with the DPA’s terms and conditions, the criminal charges against them will be dropped. Otherwise, these charges will be revived, and prosecution will continue.

Some of the countries that have DPAs in their jurisdictions are the USA, UK, Australia, and France. During the process of public consultations by the government, Canada used the UK’s DPA regime as its framework.

Does Canada have a deferred prosecution agreement?

Deferred prosecution agreement in Canada is in Part XXII.1 of the federal Criminal Code, which refers to DPAs as “Remediation Agreements”.

As defined by the Criminal Code, a Remediation Agreement is “between an organization accused of having committed an offence and a prosecutor”. Its effect is to “stay any proceedings related to that offence if the organization complies with the terms of the agreement”.

In other words, the halting of the proceedings against an organization based on a deferred prosecution agreement or a remediation agreement is based on the organization’s compliance with its terms.

#Huawei’s Meng Wanzhou and #US Department of Justice reached a deferred prosecution agreement that Meng will not be prosecuted further in US and the extradition proceedings in #Canada will be terminated under which Meng has not pleaded guilty: lawyerpic.twitter.com/TshPwxpy6t

— Global Times (@globaltimesnews) September 24, 2021

Canada has a recent case of deferred prosecution agreement, its second so far.

Legislative history of Remediation Agreement

DPAs or remediation agreements were formally enacted into Canadian law after the amendments of the federal Criminal Code. These amendments were done through Bill C-74.

In 2017, Public Services and Procurement Canada (PSPC) led consultations for implementing deferred prosecution agreements in the country. PSPC released its report in 2018.

Bill C-74, an omnibus budget legislation, was then introduced in 2018. The Bill included, among others, the amendments to the Criminal Code to introduce DPAs. Although it drew flak, the Bill was passed in 2018. It received Royal Assent and came into effect in the same year.

Objectives of deferred prosecution agreement

Under the Criminal Code, the objectives behind DPAs or remediation agreements are:

• to denounce an organization’s crimes, but still hold it accountable
• to establish an effective, proportionate, and dissuasive penalty for such crimes
• to encourage organizations to come forward and disclose the crimes they’ve committed
• to provide reparations for the harm caused by the organization’s crimes
• to reduce the crime’s negative effects on innocent persons (eg employees, customers, pensioners, etc.), while still holding responsible those involved in such crimes

“[DPAs are] an efficient way of resolving these kinds of cases, and perhaps another spin on plea bargaining. But it’s the kind of arrangement that other jurisdictions certainly have had success with, and a model that would be very useful in Canada,” says Linda Fuerst, a senior partner at Norton Rose Fulbright LLP in Toronto.

Advantages of deferred prosecution agreement

When used effectively, DPAs or remediation agreements offer various advantages when it comes to deterrence and prosecution of organizational crimes:

• improved corporate culture: through a DPA or a remediation agreement, corporate culture is revamped since compliance measures and monitoring processes are put in place
• self-reporting of crimes: since a DPA or a remediation agreement is now available, companies may be motivated to self-report crimes
• promise of “lighter” penalties: after coming forward, companies that self-report are assured that “lighter” penalties will be imposed on the erring parties
• business continuity: when individuals within a company commit crimes that carry penalties of disqualification on bidding or procuring public contracts, a company can continue running the business
• restitution of third parties: clients and other third parties who have been wronged by the company are assured protection, which may also be faster compared to a court-ordered restitution after a trial

Deferred prosecution agreements can offer an incentive to companies to come forward after discovering bribery and kickback schemes under their roof, says Kenneth Jull, counsel at Gardiner Roberts LLP.

A deferred prosecution agreement offers a haven though not a free pass, notes Jull; there will be significant fines to pay and possibly monitors, but “it’s a better incentive to come in from the cold.”

Disadvantages of deferred prosecution agreement

However, the use of DPAs or remediation agreements also has some disadvantages:

• counterintuitive: one can argue that deferred prosecution agreements may even embolden individuals to commit these crimes since they can get away with it
• unfairness: it has also been argued that a deferred prosecution agreement places corporate crimes way below other crimes because of the “lighter penalties” that replaces the original penalties
• low public confidence: when deferred prosecution agreements are “unfairly” used in the eyes of the public, confidence in the country’s justice system may erode

“A corporate entity that decides to self-report will still have to weigh the reality that self-reporting may still result in a very public prosecution,” says Joven Narwal, a Vancouver litigator.

“The solution to that is the development of deferred prosecution agreements outside of formal remediation agreements under the Criminal Code.”

Who can use a deferred prosecution agreement in Canada?

Only organizations as defined under Canada’s Criminal Code can use deferred prosecution agreements or remediation agreements. These organizations include:

• corporations
• societies
• companies
• firms
• partnerships
• association of persons created for a common purpose, has an operational structure, and holds itself out to the public as such

However, the following organizations are excluded by the Code:

• public bodies
• trade unions
• municipalities

Crimes allowed for deferred prosecution agreement

The Schedule to Part XXII.1 of the Criminal Code has a list of crimes where a remediation agreement or a DPA might be an option:

1. offences against the Administration of Law and Justice (Part IV, Criminal Code):
   • bribery of judicial officers and public officials
   • frauds on the government
   • municipal corruption and influencing of municipal officials
   • selling or purchasing of appointment or resignation from office
   • influencing or negotiating appointments or dealing in offices
   • obstructing justice (relating to sureties, evidence, jurors)
2. offences against Rights of Property (Part IX, Criminal Code) - some examples:
   • theft
   • theft by person who is required to account
   • misappropriation of money held under a specific direction
   • destruction of titles to goods or lands, securities, instruments, and judicial or official documents
   • fraudulent concealment
3. fraudulent transactions relating to Contracts and Trade (Part X, Criminal Code) - some examples:
   • fraud
   • disposal of property to defraud creditors
   • destruction, falsification, or alteration of books and documents
   • creation or use of false prospectus, statements, or accounts
   • selling defective stores to the government
   • secret commissions in relation to an agent-principal relationship
   • laundering of the proceeds of a crime
4. Corruption of Foreign Public Officials Act (CFPOA):
   • bribing a foreign public official
   • maintaining/destroying books and records to facilitate or to hide the bribery of a foreign public official

In addition are the following acts in relation to the above-listed crimes:

• conspiring to commit any of these crimes
• attempting to commit any of these crimes
• being an accessory to these crimes
• any counselling in relation to these crimes

How does deferred prosecution agreement in Canada work?

The process and conditions of a deferred prosecution agreement or remediation agreement in Canada are regulated by the Criminal Code.

This will involve numerous parties, such as the Public Prosecution Service of Canada (PPSC), the organization that committed the offence or crime, and its victims.

Conditions

It is the prosecution that decides whether an accused qualifies for the deferred prosecution agreement.

For this reason, the Criminal Code has set out certain conditions to guide prosecutors in making this decision:

• that there is reasonable prospect of conviction regarding the offence
• that the offence did not cause serious bodily harm or death; did not compromise national defense or national security
• that the offence is not an organized crime or an act of terrorism
• that negotiating the DPA is in the public interest and appropriate in the circumstances
• that the Attorney General consented to the negotiation of the DPA

Public Interest

The Criminal Code lists factors to help prosecutors decide if a deferred prosecution agreement is in the public interest:

• how the authorities were told about the offence
• how serious the offence and its effects on the victims
• how deeply involved the organization’s senior officers are

Another factor is whether the organization:

• took disciplinary action against those involved in the offence
• compensated the victims
• took steps to prevent any similar offences from happening again
• has identified, or is willing to identify, the offenders
• has been previously sanctioned, or has previously entered a DPA in Canada or abroad, for similar offences
• is alleged to have committed other offences under the Criminal Code

In addition, prosecutors may consider other factors that they deem relevant in deciding whether a case meets the public interest requirement.

Process

Below is the process in negotiating and finalizing deferred prosecution agreements in Canada:

1. the Attorney General consents to the negotiation of a DPA
2. the prosecutor sends a notice and offer to negotiate to the organization
3. if the organization accepts the offer, the prosecutor will notify the victims
4. the prosecutor and the organization work towards an agreement
5. if an agreement is reached, the prosecutor applies to the court for an order approving the DPA
6. if the court approves the DPA, the prosecutor will enter a stay of the charges
7. The organization will remediate or fulfill the terms of the DPA

If there’s a breach of the DPA, the court will terminate the agreement. Prosecution will proceed.

If the terms of the DPA are met, the prosecutor applies to the court for the DPA’s completion. This will end the criminal proceedings.

What are the terms and conditions of a deferred prosecution agreement in Canada?

Under the Criminal Code, the terms and conditions of a remediation agreement or deferred prosecution agreement in Canada may either be mandatory or optional:

1. Mandatory terms:

• the organization must agree to the facts and not contradict them in public
• the organization must admit to wrongdoing
• the organization must continue cooperating with the authorities
• the organization must give up any proceeds from the crime
• the organization must pay a fine for each offence committed
• the organization must compensate the victims and pay a victim surcharge to the government
• the organization must report to the prosecutor on how it is complying with the DPA
• the DPA is legally binding
• the organization acknowledges acting in good faith when it agreed to the DPA
• the organization will continue to provide accurate information to the government on the case
• a breach of the DPA will terminate the agreement and resume the prosecution
• the organization cannot write off for income tax purposes the reparations and restitution it will pay
• the prosecution can change or end the agreement with the Court’s approval
• the organization must comply with the terms of the DPA by a set deadline

2. Optional terms:

• the organization will establish or enhance its compliance program
• the organization must reimburse the government for costs related to the DPA
• the prosecutor will appoint an independent monitor to check that the organization is complying with the DPA

Canada’s first case of deferred prosecution agreement

Canada’s first deferred prosecution agreement involved SNC-Lavalin Group Inc. (now rebranded as AtkinsRéalis as of 2023).

In 2019, a political scandal involving SNC-Lavalin arose. A prominent Québec construction company, SNC-Lavalin was accused of bribing Libyan officials. There were also allegations that it defrauded Libyan organizations. The formal charges were filed in 2015.

Prime Minister Justin Trudeau and his cabinet were also involved in that controversy. According to the report of the Office of the Conflict of Interest and Ethics Commissioner, Trudeau was found to have influenced Jody Wilson-Raybould, who was then the Minister of Justice and Attorney General.

Trudeau allegedly wanted Wilson-Raybould to offer SNC-Lavalin a deferred prosecution agreement. Wilson-Raybould later resigned from the cabinet and quit politics.

As for SNC-Lavalin, a DPA was more advantageous for the company since it could evade prosecution of the crimes it allegedly committed.

By the end of 2019, SNC-Lavalin had neither gone to trial nor received a DPA. As SNC-Lavalin pleaded guilty to fraud under the Criminal Code, the company and the PPSC reached an agreement for the company to pay a $280-million fine.

In return, federal prosecutors dropped the remaining charges against the company. In effect, this allowed the company to continue bidding on public contracts in Canada after its rebranding in 2023.

Interested in more deep dives into aspects of criminal law? Head over and bookmark our page on Criminal practice area to find articles on Canada’s criminal laws and actual cases.

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